EXHIBIT 99A.DOC
STANDBY EQUITY DISTRIBUTION AGREEMENT
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THIS AGREEMENT dated as of the ___ day of October 2004 (the "Agreement") between
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CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the "Investor"),
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and INTREPID TECHNOLOGY & RESOURCES, INC., a corporation organized and existing
under the laws of the State of Idaho (the "Company").
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WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase from the Company up to
Twenty Five Million U.S. Dollars ($25,000,000) of the Company's common stock,
par value $0.005 per share (the "Common Stock"); and
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WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
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regulations promulgated thereunder (the "Securities Act"), and or upon such
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other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
WHEREAS, the Company has engaged Newbridge Securities Corporation (the
"Placement Agent"), to act as the Company's exclusive placement agent in
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connection with the sale of the Company's Common Stock to the Investor hereunder
pursuant to the Placement Agent Agreement dated the date hereof by and among the
Company, the Placement Agent and the Investor (the "Placement Agent Agreement").
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NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.1. "Advance" shall mean the portion of the Commitment Amount
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requested by the Company in the Advance Notice.
Section 1.2. "Advance Date" shall mean the date the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Attorney
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Trust Account is in receipt of the funds from the Investor and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Esq., is in possession of free trading shares from the Company and therefore an
Advance by the Investor to the Company can be made and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. can
release the free trading shares to the Investor. The Advance Date shall be the
first (1st) Trading Day after expiration of the applicable Pricing Period for
each Advance.
Section 1.3. "Advance Notice" shall mean a written notice to the Investor
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setting forth the Advance amount that the Company requests from the Investor and
the Advance Date.
Section 1.4. "Advance Notice Date" shall mean each date the Company delivers
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to the Investor an Advance Notice requiring the Investor to advance funds to the
Company, subject to the terms of this Agreement. No Advance Notice Date shall
be less than seven (7) Trading Days after the prior Advance Notice Date.
Section 1.5. "Bid Price" shall mean, on any date, the closing bid price (as
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reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if
the Common Stock is not traded on a Principal
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Market, the highest reported bid price for the Common Stock, as furnished by the
National Association of Securities Dealers, Inc.
Section 1.6. "Closing" shall mean one of the closings of a purchase and sale
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of Common Stock pursuant to Section 2.3.
Section 1.7. "Commitment Amount" shall mean the aggregate amount of up to
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Twenty Five Million U.S. Dollars ($25,000,000) which the Investor has agreed to
provide to the Company in order to purchase the Company's Common Stock pursuant
to the terms and conditions of this Agreement.
Section 1.8. "Commitment Period" shall mean the period commencing on the
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earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of Twenty Five
Million U.S. Dollars ($25,000,000), (y) the date this Agreement is terminated
pursuant to Section 2.5, or (z) the date occurring twenty-four (24) months after
the Effective Date.
Section 1.9. "Common Stock" shall mean the Company's common stock, par value
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$0.005 per share.
Section 1.10. "Condition Satisfaction Date" shall have the meaning set forth in
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Section 7.2.
Section 1.11. "Damages" shall mean any loss, claim, damage, liability, costs
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and expenses (including, without limitation, reasonable attorney's fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12. "Effective Date" shall mean the date on which the SEC first
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declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13. "Escrow Agreement" shall mean the escrow agreement among the
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Company, the Investor, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., dated the date hereof.
Section 1.14. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, and the rules and regulations promulgated thereunder.
Section 1.15. "Material Adverse Effect" shall mean any condition, circumstance,
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or situation that would prohibit or otherwise materially interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement or the Registration Rights Agreement in any material respect.
Section 1.16. "Market Price" shall mean the lowest closing Bid Price of the
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Common Stock during the Pricing Period.
Section 1.17. "Maximum Advance Amount" shall be Three Hundred Fifty Thousand
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U.S. Dollars (US$350,000) per Advance Notice, provided that aggregate Advances
in any thirty (30) day period shall not exceed One Million Two Hundred Thousand
Dollars ($1,200,000).
Section 1.18. "NASD" shall mean the National Association of Securities Dealers,
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Inc.
Section 1.19. "Person" shall mean an individual, a corporation, a partnership,
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an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Section 1.20. "Placement Agent" shall mean Newbridge Securities Corporation, a
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registered broker-dealer.
Section 1.21. "Pricing Period" shall mean the five (5) consecutive Trading Days
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after the Advance Notice Date.
Section 1.22. "Principal Market" shall mean the Nasdaq National Market, the
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Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin Board or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
Section 1.23. "Purchase Price" shall be set at ninety nine percent (99%) of the
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Market Price during the Pricing Period.
Section 1.24. "Registrable Securities" shall mean the shares of Common Stock to
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be issued hereunder (i) in respect of which the Registration Statement has not
been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") or (iii)
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which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act,
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and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend.
Section 1.25. "Registration Rights Agreement" shall mean the Registration
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Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company and the Investor.
Section 1.26. "Registration Statement" shall mean a registration statement on
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Form S-1 or SB-2 (if use of such form is then available to the Company pursuant
to the rules of the SEC and, if not, on such other form promulgated by the SEC
for which the Company then qualifies and which counsel for the Company shall
deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.27. "Regulation D" shall have the meaning set forth in the recitals
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of this Agreement.
Section 1.28. "SEC" shall mean the Securities and Exchange Commission.
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Section 1.29. "Securities Act" shall have the meaning set forth in the recitals
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of this Agreement.
Section 1.30. "SEC Documents" shall mean Annual Reports on Form 10-KSB,
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Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.31. "Trading Day" shall mean any day during which the New York Stock
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Exchange shall be open for business.
ARTICLE I.
ADVANCES
Section 1.1. Investments.
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(1) (a) Advances. Upon the terms and conditions set forth
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herein (including, without limitation, the provisions of Article
VII hereof), on any Advance Notice Date the Company may request
an Advance by the Investor by the delivery of an Advance Notice.
The number of shares of Common Stock that the Investor shall
receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price. No fractional shares
shall be issued. Fractional shares shall be rounded to the next
higher whole number of shares. The aggregate maximum amount of
all Advances that the Investor shall be obligated to make under
this Agreement shall not exceed the Commitment Amount.
Section 1.2. Mechanics.
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(2) (a) Advance Notice. At any time during the Commitment
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Period, the Company may deliver an Advance Notice to the
Investor, subject to the conditions set forth in Section 7.2;
provided, however, the amount for each Advance as designated by
the Company in the applicable Advance Notice, shall not be more
than the Maximum Advance Amount. The aggregate amount of the
Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may
sell shares of the Company's Common Stock corresponding with a
particular Advance Notice on the day the Advance Notice is
received by the Investor. There shall be a minimum of seven (7)
Trading Days between each Advance Notice Date.
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(3) (b) Date of Delivery of Advance Notice. An Advance
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Notice shall be deemed delivered on (i) the Trading Day it is
received by facsimile or otherwise by the Investor if such notice
is received prior to 12:00 noon Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile
or otherwise after 12:00 noon Eastern Time on a Trading Day or at
any time on a day which is not a Trading Day. No Advance Notice
may be deemed delivered on a day that is not a Trading Day.
(4) (c) Pre-Closing Share Credit. Within two (2) business
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days after the Advance Notice Date, the Company shall credit
shares of the Company's Common Stock to the Investor's counsel's
balance account with The Depository Trust Company through its
Deposit Withdrawal At Custodian system, in an amount equal to the
amount of the requested Advance divided by the closing Bid Price
of the Company's Common Stock as of the Advance Notice Date
multiplied by one point one (1.1). Any adjustments to the number
of shares to be delivered to the Investor at the Closing as a
result of fluctuations in the closing Bid Price of the Company's
Common Stock shall be made as of the date of the Closing. Any
excess shares shall be credited to the next Advance. In no event
shall the number of shares issuable to the Investor pursuant to
an Advance cause the Investor to own in excess of nine and 9/10
percent (9.9%) of the then outstanding Common Stock of the
Company.
(5) (d) Hardship. In the event the Investor sells the
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Company's Common Stock pursuant to subsection (c) above and the
Company fails to perform its obligations as mandated in Section
2.5 and 2.2 (c), and specifically fails to provide the Investor
with the shares of Common Stock for the applicable Advance, the
Company acknowledges that the Investor shall suffer financial
hardship and therefore shall be liable for any and all losses,
commissions, fees, or financial hardship caused to the Investor.
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Section 2.3. Closings. On each Advance Date, which shall be the first (1st)
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Trading Day after expiration of the applicable Pricing Period for each Advance,
(i) the Company shall deliver to the Investor's Counsel, as defined pursuant to
the Escrow Agreement, shares of the Company's Common Stock, representing the
amount of the Advance by the Investor pursuant to Section 2.1 herein, registered
in the name of the Investor which shall be delivered to the Investor, or
otherwise in accordance with the Escrow Agreement and (ii) the Investor shall
deliver to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the "Escrow Agent") the amount of the Advance
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specified in the Advance Notice by wire transfer of immediately available funds
which shall be delivered to the Company, or otherwise in accordance with the
Escrow Agreement. In addition, on or prior to the Advance Date, each of the
Company and the Investor shall deliver to the other through the Investor's
Counsel, all documents, instruments and writings required to be delivered by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Payment of funds to the Company and delivery
of the Company's Common Stock to the Investor shall occur in accordance with the
conditions set forth above and those contained in the Escrow Agreement;
provided, however, that to the extent the Company has not paid the fees,
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expenses, and disbursements of the Investor or ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP in
accordance with Section 12.4, the amount of such fees, expenses, and
disbursements may be deducted by the Investor (and shall be paid to the relevant
party) from the amount of the Advance with no reduction in the amount of shares
of the Company's Common Stock to be delivered on such Advance Date.
Section 2.4. Termination of Investment. The obligation of the Investor to
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make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of fifty
(50) Trading Days, other than due to the acts of the Investor, during the
Commitment Period, and (ii) the Company shall at any time fail materially to
comply with the requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written notice from the Investor, provided,
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however, that this termination provision shall not apply to any period
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commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC.
Section 2.5. Agreement to Advance Funds.
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(6) (a) The Investor agrees to advance the amount
specified in the Advance Notice to the Company after the
completion of each of the following conditions and the other
conditions set forth in this Agreement:
1. (i) the execution and delivery by the Company,
and the Investor, of this Agreement and the Exhibits hereto;
2. (ii) Investor's Counsel shall have received the
shares of Common Stock applicable to the Advance in
accordance with Section 2.2(c) hereof;
3. (iii) the Company's Registration Statement with
respect to the resale of the Registrable Securities in
accordance with the terms of the Registration Rights
Agreement shall have been declared effective by the SEC;
4. (iv) the Company shall have obtained all material
permits and qualifications required by any applicable state
for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom. The
sale and issuance of the Registrable Securities
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shall be legally permitted by all laws and regulations to
which the Company is subject;
5. (v) the Company shall have filed with the
Commission in a timely manner all reports, notices and other
documents required of a "reporting company" under the
Exchange Act and applicable Commission regulations;
6. (vi) the fees as set forth in Section 12.4 below
shall have been paid or can be withheld as provided in
Section 2.3; and
7. (vii) the conditions set forth in Section 7.2
shall have been satisfied.
8. (viii) the Company shall have provided to the
Investor an acknowledgement, from Balukoff, ▇▇▇▇▇▇▇▇▇ & Co.,
P.A. as to its ability to provide all consents required in
order to file a registration statement in connection with
this transaction;
9. (ix) The Company's transfer agent shall be DWAC
eligible.
Section 2.6. Lock Up Period.
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10. (i) During the Commitment Period, the Company
shall not issue or sell (i) any Common Stock or Preferred
Stock without consideration or for a consideration per share
less than the Bid Price on the date of issuance or (ii)
issue or sell any warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a
consideration per share less than the Bid Price on the date
of issuance.
11. (ii) On the date hereof, the Company shall obtain
from each officer and director a lock-up agreement, as
defined below, in the form annexed hereto as Schedule 2.6
agreeing to only sell in compliance with the volume
limitation of Rule 144.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and as of the date hereof and as of each Advance Date:
Section 3.1. Organization and Authorization. The Investor is duly
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incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has
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been duly executed and delivered by the Investor and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.
Section 3.2. Evaluation of Risks. The Investor has such knowledge and
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experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor acknowledges that
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it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
Section 3.4. Investment Purpose. The securities are being purchased by the
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Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part. The Investor agrees not to assign or in any way transfer the Investor's
rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in
accordance with applicable Federal and state securities laws. No other person
has or will have a direct or indirect beneficial interest in the securities.
The Investor agrees not to sell, hypothecate or otherwise transfer the
Investor's securities unless the securities are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such laws is available.
Section 3.5. Accredited Investor. The Investor is an "Accredited Investor" as
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that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
Section 3.6. Information. The Investor and its advisors (and its counsel), if
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any, have been furnished with all materials relating to the business, finances
and operations of the Company and information it deemed material to making an
informed investment decision. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management.
Neither such inquiries nor any other due diligence investigations conducted by
such Investor or its advisors, if any, or its representatives shall modify,
amend or affect the Investor's right to rely on the Company's representations
and warranties contained in this Agreement. The Investor understands that its
investment involves a high degree of risk. The Investor is in a position
regarding the Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables such Investor to obtain
information from the Company in order to evaluate the merits and risks of this
investment. The Investor has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to this transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel have received
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and read in their entirety: (i) this Agreement and the Exhibits annexed hereto;
(ii) all due diligence and other information necessary to verify the accuracy
and completeness of such representations, warranties and covenants; (iii) the
Company's Form 10-KSB for the year ended June 30, 2003 and Form 10-QSB for the
period ended March 31, 2004 and (iv) answers to all questions the Investor
submitted to the Company regarding an investment in the Company; and the
Investor has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.
Section 3.8. Registration Rights Agreement and Escrow Agreement. The parties
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have entered into the Registration Rights Agreement and the Escrow Agreement,
each dated the date hereof.
Section 3.9. No General Solicitation. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.
Section 3.10. Not an Affiliate. The Investor is not an officer, director or a
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person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control
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with the Company or any "Affiliate" of the Company (as that term is defined in
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Rule 405 of the Securities Act). Neither the Investor nor its Affiliates has an
open short position in the Common Stock of the Company, and the Investor agrees
that it will not, and that it will cause its Affiliates not to, engage in any
short sales of or hedging transactions with respect to the Common Stock,
provided that the Company acknowledges and agrees that upon receipt of an
Advance Notice the Investor will sell the Shares to be issued to the Investor
pursuant to the Advance Notice, even if the Shares have not been delivered to
the Investor.
Section 3.11. Trading Activities. The Investor's trading activities with
respect to the Company's Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company's Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company and, except as set forth below, the
Investor shall not and will cause its affiliates not to engage in any short sale
as defined in any applicable SEC or National Association of Securities Dealers
rules on any hedging transactions with respect to the Common Stock. Without
limiting the foregoing, the Investor agrees not to engage in any naked short
transactions in excess of the amount of shares owned (or an offsetting long
position) during the Commitment Period. The Investor shall be entitled to sell
Common Stock during the applicable Pricing Period.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and warrants
to, and covenants with, the Investor that the following are true and correct as
of the date hereof:
Section 4.1. Organization and Qualification. The Company is duly incorporated
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or organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority corporate power to own
its properties and to carry on its business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other Instruments.
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(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Placement Agent Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Placement Agent Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and assuming the execution and delivery thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
Section 4.3. Capitalization. As of the date hereof, the authorized capital
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stock of the Company consists of 185,000,000 shares of Common Stock, par value
$0.005 per share and no shares of Preferred Stock of which 118,384,169 shares of
Common Stock were issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. Except as disclosed
in the SEC Documents, no shares of Common Stock are subject to preemptive rights
or any other similar
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rights or any liens or encumbrances suffered or permitted by the Company.
Except as disclosed in the SEC Documents, as of the date hereof, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-8 and (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein. The Company has furnished to the
Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "Certificate of
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Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
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"By-laws"), and the terms of all securities convertible into or exercisable for
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Common Stock and the material rights of the holders thereof in respect thereto.
Section 4.4. No Conflict. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which would cause a
Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.
Section 4.5. SEC Documents; Financial Statements. Since January 1, 2003, the
-----------------------------------
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under of the Exchange Act. The Company
has delivered to the Investor or its representatives, or made available through
the SEC's website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇, true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "Financial Statements") complied as
--------------------
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently
13
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and, fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue statements of
-----
material fact, nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.
Section 4.7. No Default. Except as disclosed in the SEC Documents, the
----------
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its property is bound and neither the execution,
nor the delivery by the Company, nor the performance by the Company of its
obligations under this Agreement or any of the exhibits or attachments hereto
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of
trust or other material agreement applicable to the Company or instrument to
which the Company is a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a Material Adverse Effect on
the Company's business or financial condition.
Section 4.8. Absence of Events of Default. Except for matters described in
----------------------------
the SEC Documents and/or this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's business, properties, prospects,
financial condition or results of operations.
Section 4.9. Intellectual Property Rights. The Company and its subsidiaries
----------------------------
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 4.10. Employee Relations. Neither the Company nor any of its
------------------
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
Section 4.11. Environmental Laws. The Company and its subsidiaries are (i) in
------------------
compliance with any and all applicable material foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
------------------
or other approvals required
14
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval.
Section 4.12. Title. Except as set forth in the SEC Documents, the Company has
-----
good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company. Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.13. Insurance. The Company and each of its subsidiaries are insured
---------
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.14. Regulatory Permits. The Company and its subsidiaries possess all
------------------
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.15. Internal Accounting Controls. The Company and each of its
----------------------------
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the
---------------------------------
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
Section 4.17. Absence of Litigation. Except as set forth in the SEC Documents,
---------------------
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
15
Section 4.18. Subsidiaries. Except as disclosed in the SEC Documents, the
------------
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the
----------
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
Section 4.20. Certain Transactions. Except as set forth in the SEC Documents
--------------------
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
Section 4.21. Fees and Rights of First Refusal. The Company is not obligated
--------------------------------
to offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.
Section 4.22. Use of Proceeds. The Company represents that the net proceeds
---------------
from this offering will be used for general corporate purposes. However, in no
event shall the net proceeds from this offering be used by the Company for the
payment (or loaned to any such person for the payment) of any judgment, or other
liability, incurred by any executive officer, officer, director or employee of
the Company, except for any liability owed to such person for services rendered,
or if any judgment or other liability is incurred by such person originating
from services rendered to the Company, or the Company has indemnified such
person from liability.
Section 4.23. Further Representation and Warranties of the Company. For so
----------------------------------------------------
long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.
Section 4.24. Opinion of Counsel. Investor shall receive an opinion letter
------------------
from ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, counsel to the Company, on the date hereof.
Section 4.25. Opinion of Counsel. The Company will obtain for the Investor, at
------------------
the Company's expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without restriction.
Section 4.26. Dilution. The Company is aware and acknowledges that issuance of
--------
shares of the Company's Common Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.
ARTICLE V.
INDEMNIFICATION
The Investor and the Company represent to the other the following with respect
to itself:
16
Section 5.1. Indemnification.
---------------
(7) (a) In consideration of the Investor's execution and
delivery of this Agreement, and in addition to all of the
Company's other obligations under this Agreement, the Company
shall defend, protect, indemnify and hold harmless the Investor,
and all of its officers, directors, partners, employees and
agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Investor Indemnitees") from and against any
--------------------
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by
-----------------------
the Investor Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in
this Agreement or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit
or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee,
and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any
of the Investor Indemnitees. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(8) (b) In consideration of the Company's execution and
delivery of this Agreement, and in addition to all of the
Investor's other obligations under this Agreement, the Investor
shall defend, protect, indemnify and hold harmless the Company
and all of its officers, directors, shareholders, employees and
agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Company Indemnitees") from and against any
--------------------
and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any
representation or warranty made by the Investor in this
Agreement, the Registration Rights Agreement, or any instrument
or document contemplated hereby or thereby executed by the
Investor, (b) any breach of any covenant, agreement or obligation
of the Investor(s) contained in this Agreement, the Registration
Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Investor, or (c)
any cause of action, suit or claim brought or made against such
Company Indemnitee based on misrepresentations or due to a breach
by the Investor and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement
or any other instrument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. To the extent that
17
the foregoing undertaking by the Investor may be unenforceable
for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
(9) (c) The obligations of the parties to indemnify or
make contribution under this Section 5.1 shall survive
termination.
18
ARTICLE VI.
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the Registration
-------------------
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Listing of Common Stock. The Company shall maintain the Common
-----------------------
Stock's authorization for quotation on the National Association of Securities
Dealers Inc.'s Over the Counter Bulletin Board.
Section 6.3. Exchange Act Registration. The Company will cause its Common
-------------------------
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Exchange Act.
Section 6.4. Transfer Agent Instructions. Not later than two (2) business
---------------------------
days after each Advance Notice Date and prior to each Closing and the
effectiveness of the Registration Statement and resale of the Common Stock by
the Investor, the Company will deliver instructions to its transfer agent to
issue shares of Common Stock free of restrictive legends.
Section 6.5. Corporate Existence. The Company will take all steps necessary
-------------------
to preserve and continue the corporate existence of the Company.
Section 6.6. Notice of Certain Events Affecting Registration; Suspension of
--------------------------------------------------------------
Right to Make an Advance. The Company will immediately notify the Investor upon
------------------------
its becoming aware of the occurrence of any of the following events in respect
of a registration statement or related prospectus relating to an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other Federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other Federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
Section 6.7. Expectations Regarding Advance Notices. Within ten (10) days
--------------------------------------
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
Notices. Such notification shall constitute only the Company's good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company's
notifying the
19
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.8. Restriction on Sale of Capital Stock. During the Commitment
------------------------------------
Period, the Company shall not issue or sell (i) any Common Stock or Preferred
Stock without consideration or for a consideration per share less than the bid
price of the Common Stock determined immediately prior to its issuance, (ii)
issue or sell any Preferred Stock warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share less than
such Common Stock's Bid Price determined immediately prior to its issuance, or
(iii) file any registration statement on Form S-8.
Section 6.9. Consolidation; Merger. The Company shall not, at any time after
---------------------
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all the assets of the Company to another
entity (a "Consolidation Event") unless the resulting successor or acquiring
-------------------
entity (if not the Company) assumes by written instrument the obligation to
deliver to the Investor such shares of stock and/or securities as the Investor
is entitled to receive pursuant to this Agreement.
Section 6.10. Issuance of the Company's Common Stock. The sale of the shares
---------------------------------------
of Common Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.
ARTICLE VII.
CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING
Section 7.1. Conditions Precedent to the Obligations of the Company. The
-------------------------------------------------------
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.
(10) (a) Accuracy of the Investor's Representations and
-------------------------------------------------
Warranties. The representations and warranties of the Investor
----------
shall be true and correct in all material respects.
(11) (b) Performance by the Investor. The Investor shall
----------------------------
have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement
and the Registration Rights Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver an
--------------------------------------------------------------
Advance Notice and the Obligation of the Investor to Purchase Shares of Common
------------------------------------------------------------------------------
Stock. The right of the Company to deliver an Advance Notice and the obligation
-----
of the Investor hereunder to acquire and pay for shares of the Company's Common
Stock incident to a Closing is subject to the fulfillment by the Company, on (i)
the date of delivery of such Advance Notice and (ii) the applicable Advance Date
(each a "Condition Satisfaction Date"), of each of the following conditions:
---------------------------
(12) (a) Registration of the Common Stock with the SEC.
------------------------------------------------
The Company shall have filed with the SEC a Registration
Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously
become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or
that the SEC otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily
or permanently, or intends or has threatened to do so
20
(unless the SEC's concerns have been addressed and the Investor
is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the
use or withdrawal of the effectiveness of the Registration
Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to
the first Advance Notice Date.
(13) (b) Authority. The Company shall have obtained all
---------
permits and qualifications required by any applicable state in
accordance with the Registration Rights Agreement for the offer
and sale of the shares of Common Stock, or shall have the
availability of exemptions therefrom. The sale and issuance of
the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
(14) (c) Fundamental Changes. There shall not exist any
--------------------
fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a
post-effective amendment to the Registration Statement.
(15) (d) Performance by the Company. The Company shall
-----------------------------
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement (including, without limitation, the conditions
specified in Section 2.5 hereof) and the Registration Rights
Agreement to be performed, satisfied or complied with by the
Company at or prior to each Condition Satisfaction Date.
(16) (e) No Injunction. No statute, rule, regulation,
--------------
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits
or directly and adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely
affecting any of the transactions contemplated by this Agreement.
(17) (f) No Suspension of Trading in or Delisting of Common
--------------------------------------------------
Stock. The trading of the Common Stock is not suspended by the
-----
SEC or the Principal Market (if the Common Stock is traded on a
Principal Market). The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market (if the
Common Stock is traded on a Principal Market). The Company shall
not have received any notice threatening the continued listing of
the Common Stock on the Principal Market (if the Common Stock is
traded on a Principal Market).
(18) (g) Maximum Advance Amount. The amount of an Advance
----------------------
requested by the Company shall not exceed the Maximum Advance
Amount. In addition, in no event shall the number of shares
issuable to the Investor pursuant
21
to an Advance cause the Investor to own in excess of nine and
9/10 percent (9.9%) of the then outstanding Common Stock of the
Company.
(19) (h) No Knowledge. The Company has no knowledge of any
------------
event which would be more likely than not to have the effect of
causing such Registration Statement to be suspended or otherwise
ineffective.
(20) (i) Other. On each Condition Satisfaction Date, the
-----
Investor shall have received the certificate executed by an
officer of the Company in the form of Exhibit A attached hereto.
---------
ARTICLE VIII.
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1. Due Diligence Review. Prior to the filing of the Registration
--------------------
Statement the Company shall make available for inspection and review by the
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
----------------------------------------
(21) (a) The Company shall not disclose non-public
information to the Investor, its advisors, or its
representatives, unless prior to disclosure of such information
the Company identifies such information as being non-public
information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to
accept such non-public information for review. The Company may,
as a condition to disclosing any non-public information
hereunder, require the Investor's advisors and representatives to
enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(22) (b) Nothing herein shall require the Company to
disclose non-public information to the Investor or its advisors
or representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or
to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove
provided, immediately notify the advisors and representatives of
the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of
the
22
Company specifically or generally during the course of due
diligence by such persons or entities), which, if not disclosed
in the prospectus included in the Registration Statement would
cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to
make the statements, therein, in light of the circumstances in
which they were made, not misleading. Nothing contained in this
Section 8.2 shall be construed to mean that such persons or
entities other than the Investor (without the written consent of
the Investor prior to disclosure of such information) may not
obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits
a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein,
in light of the circumstances in which they were made, not
misleading.
ARTICLE IX.
CHOICE OF LAW/JURISDICTION
Section 9.1. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. The parties further agree that
any action between them shall be heard in ▇▇▇▇▇▇ County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in ▇▇▇▇▇▇ County, New Jersey and the United States District
Court of New Jersey, sitting in Newark, New Jersey, for the adjudication of any
civil action asserted pursuant to this paragraph.
ARTICLE IX.
ASSIGNMENT; TERMINATION
Section 10.1. Assignment. Neither this Agreement nor any rights of the Company
----------
hereunder may be assigned to any other Person.
Section 10.2. Termination. The obligations of the Investor to make Advances
-----------
under Article II hereof shall terminate twenty-four (24) months after the
Effective Date.
ARTICLE X.
NOTICES
Section 11.1. Notices. Any notices, consents, waivers, or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested, or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company, to: Intrepid Technology & Resources, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
23
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor(s): Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ -▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all
----------------------------
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 12.3. Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 12.4. Fees and Expenses. The Company hereby agrees to pay the
-----------------
following fees:
(23) (a) Structuring Fees. Each of the parties shall pay
-----------------
its own fees and expenses (including the fees of any attorneys,
accountants, appraisers or others engaged by such party) in
connection with this Agreement and the
24
transactions contemplated hereby, except that the Company will
pay a structuring fee of Fifteen Thousand Dollars ($15,000) to
Yorkville Advisors Management, LLC, which shall be paid directly
from the gross proceeds of the First Closing of the Convertible
Debenture transaction pursuant to the Securities Purchase
Agreement dated the date hereof. Subsequently on each advance
date, the Company will pay Yorkville Advisors Management, LLC a
structuring fee of Five Hundred Dollars ($500) and any
outstanding fees of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP directly out the
proceeds of any Advances hereunder.
(24) (b) Commitment Fees.
----------------
1. (i) On each Advance Date the Company shall pay to
the Investor, directly from the gross proceeds held in
escrow, an amount equal to five percent (5%) of the amount
of each Advance. The Company hereby agrees that if such
payment, as is described above, is not made by the Company
on the Advance Date, such payment will be made at the
direction of the Investor as outlined and mandated by
Section 2.3 of this Agreement.
2. (ii) Upon the execution of this Agreement the
Company shall issue to the Investor shares of the Company's
Common Stock in an amount equal to Four Hundred Ninety
Thousand Dollars ($490,000) divided by the closing bid price
of the Company's Common Stock, as quoted by Bloomberg, LP,
on the date hereof (the "Investor's Shares").
------------------
3. (iii) Fully Earned. The Investor's Shares shall
-------------
be deemed fully earned as of the date hereof.
4. (iv) Registration Rights. The Investor's Shares
--------------------
will have "piggy-back" registration rights.
Section 12.5. Brokerage. Each of the parties hereto represents that it has had
---------
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 12.6. Confidentiality. If for any reason the transactions contemplated
---------------
by this Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party's domain prior to the date hereof, and
except as required by court order) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information without retaining copies thereof, previously furnished by it as a
result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
COMPANY:
INTREPID TECHNOLOGY & RESOURCES, INC.
By:
-------------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
BY: YORKVILLE ADVISORS, LLC
ITS: GENERAL PARTNER
By:
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
26
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
INTREPID TECHNOLOGY & RESOURCES, INC.
The undersigned, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby certifies, with respect to the sale
of shares of Common Stock of INTREPID TECHNOLOGY & RESOURCES, INC. (the
"Company"), issuable in connection with this Advance Notice and Compliance
-------
Certificate dated ___________________ (the "Notice"), delivered pursuant to the
------
Standby Equity Distribution Agreement (the "Agreement"), as follows:
---------
1. The undersigned is the duly elected President and CEO of the Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The undersigned hereby represents, warrants and covenants that it has made
all filings ("SEC Filings") required to be made by it pursuant to applicable
------------
securities laws (including, without limitation, all filings required under the
Securities Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K, etc. All
SEC Filings and other public disclosures made by the Company, including, without
limitation, all press releases, analysts meetings and calls, etc. (collectively,
the "Public Disclosures"), have been reviewed and approved for release by the
-------------------
Company's attorneys and, if containing financial information, the Company's
independent certified public accountants. None of the Company's Public
Disclosures contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of ________________.
INTREPID TECHNOLOGY & RESOURCES, INC.
By:
-------------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
27
SCHEDULE 2.6
------------
INTREPID TECHNOLOGY & RESOURCES, INC.
-------------------------------------
The undersigned hereby agrees that for a period commencing on the date hereof
and expiring on the termination of the Agreement dated October __, 2004 between
Intrepid Technology & Resources, Inc., (the "Company"), and Cornell Capital
-------
Partners, LP, (the "Investor") (the "Lock-up Period"), he, she or it will not,
-------- --------------
directly or indirectly, without the prior written consent of the Investor,
issue, offer, agree or offer to sell, sell, grant an option for the purchase or
sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber
or dispose of except pursuant to Rule 144 of the General Rules and Regulations
under the Securities Act of 1933, any securities of the Company, including
common stock or options, rights, warrants or other securities underlying,
convertible into, exchangeable or exercisable for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned by
the undersigned), or any beneficial interest therein (collectively, the
"Securities").
----------
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.
Dated: _______________, 2004
Signature
----------------------------------------
Address:
--------------------------------
City, State, Zip Code:
------------------
----------------------------------------
Print Social Security Number
or Taxpayer I.D. Number
28